The data calendar is lighter this coming week (June 4-8), with few implications for monetary policy. The ISM Non-Manufacturing Index should fall for a third consecutive month but remain comfortably in expansion territory. A second pass at first-quarter labor productivity is likely to show a less severe slowdown than initially estimated, as employee hours were revised down by more than growth. Finally, the trade deficit is expected to shrink by about $4 billion as imports fall by more than exports, thanks to lower oil prices.
Tuesday, June 5 ? ISM Non-Manufacturing Index (May)
Several economic indicators suggest that the recovery has hit a soft patch, and non-manufacturing industries are likely to expand at a slightly slower pace in May than in April.
Wednesday, June 6 ? Productivity, Final (Q1)
We project that the decline in labor productivity will be trimmed in the final Q1 reading, as fewer employee hours outweighed slower-than-anticipated output growth. Unit labor costs will be up 1.3%, less than first estimated, on slower compensation growth.
Friday, June 8- Trade Balance (Apr.)
The foreign trade deficit is expected to fall back to $48.0 billion in April after a sharp bounce to $51.8 billion in March. Imports and exports should fall, but imports should drop faster. A sharp decline in the oil import bill (due to falling prices and volumes) will combine with lower capital goods and automotive imports. Exports are expected to fall back as industrial supplies contract sharply, and capital and consumer goods post smaller losses. Foreign trade should be a drag for growth in the second quarter of 2012.
